President Trump recently announced tariffs on imported steel at 25 percent and tariffs on imported aluminum at 10 percent. As predicted, free trade advocates instantly warned of global catastrophe, foreign retaliation, a trade war, and another Great Depression similar to the 1930s.
Simply put, these predictions of gloom and doom amount to absolutely nothing.
According to Scott Paul, president of the Alliance for American Manufacturing (AAM), “It’s a nice scare tactic, but Smoot-Hawley included tariff changes that impacted 20,000 categories of goods, and it was enacted by Congress at a time when the economy was nose-diving and the stock market had already crashed. It’s not a reasonable comparison to the current situation today.” Tariffs on steel and aluminum represent two categories or .01 percent of the categories from the Smoot-Hawley tariffs.
The United States is not starting a trade war. We are responding to a trade war previously initiated by several foreign countries, many of which have discriminated against U.S. exports for decades.
According to U.S. Secretary of Commerce Wilbur Ross, “The EU charges a 10 percent tariff on imported American cars, while the U.S. imposes only a 2.5 percent tariff on imported European cars. Today Europe exports 1.14 million automobiles to the U.S., nearly four times as many as the U.S. exports to Europe. China, which is the world’s largest automobile market, has a 25 percent tariff on imported vehicles…” including American-made Cadillacs. The American-made Jeep Grand Cherokee costs $27,490 at U.S. dealerships and costs at least $85,000 in China. Even higher tariffs are applied to U.S. luxury vehicles exported to China.
According to the Made in USA Foundation, “Canada charges 300 percent duties on American dairy products and chicken. Our very ‘nice’ neighbors to the north have been screwing us on trade in dairy, chicken, beer, and autos for years.”
The CEO for Coors warns of an increase in prices for beer cans should we enact aluminum tariffs. But that potential price increase has been estimated to be 0.5 cents to 1 cent per can. If you can’t stand paying 3-6 cents more for a six-pack to save a critical American industry, then buy your beer in bottles instead.
Nothing good comes for free and there is no free lunch. Freedom isn’t free. Our high national living standards aren’t, either. Everything beneficial to the nation comes at a cost, even if it comes in the form of occasional higher prices for American-made goods.
In backing down out of fear of a trade war, the United States signals a defeatist mindset. It’s as if we are saying, “How dare we stand up for our country, our workers, our industries, and our markets? We would be much better off doing nothing, avoiding a trade war, and allowing foreign countries to run us over and decimate our industries with their exports.”
Do we not realize that as big and diverse as our country is, that we are a net importer of steel? How does depending on foreign steel and aluminum make us an independent nation? Can we be an independent nation if we have to rely on foreign producers for critical components like steel that is necessary for U.S. military submarines, tanks, and battleships? What about steel for non-military needs like critical infrastructure like roads, bridges, and our electrical grid? If we can all (mostly) agree we should be energy independent, why can’t we agree to be steel and aluminum independent? Why celebrate Independence Day on July 4th if we aren’t an independent nation?
The United States stands to win any trade war. When we have the best and most lucrative market in the world that everyone wants to access (until China surpasses us as they pursue protectionism and we stupidly pursue free trade), we have the upper hand. It is truly baffling why so many in academia and elsewhere who are supposed to be so smart can be so foolish and think that if we get into a trade war, we will automatically lose.
If the U.S. doom and gloom of a modest 25 percent tariff were so guaranteed, China and other high tariff countries would be reeling right now. Instead, China is decimating our economy and deluging us with their exports because for a very long time; we have refused to stand up for ourselves.
It’s as if foreign countries think they have some constitutional right to access America’s market tax-free and duty-free. But our U.S. Constitution says we have the power to “regulate trade with foreign nations…” and never mentions free trade or free markets. Why does no founding national document even mention free trade? Because free trade and free markets were never intended to be a guiding national policy by our Founding Fathers. We should reject free trade now just like the Founding Fathers did.
So let’s stop kidding ourselves into thinking that we can consume our way to national prosperity. If we don’t produce in critical industries like steel and aluminum, we will only be relegated to inter-dependence. And then we should just stay home on July 4th.